The European Commission has launched an in-depth investigation into
Nike’s tax arrangements in the Netherlands, looking to examine whether the
country’s tax administration body, Belastingdienst, has given the
sportswear giant an unfair advantage over its competitors.

Between 2006 and 2015, Dutch authorities issued five tax rulings, two of
which are still in force, approving a method to calculate tax-deductible
royalty payments to two Nike divisions based in the country, namely Nike
European Operations Netherlands BV and Converse Netherlands BV. These two
companies develop, sell, market and record the sales of Nike and Converse
products in the entire EMEA (Europe, Middle East and Africa) region.
According to the European Commission, these rulings allow for the two
companies to only be taxed in the Netherlands, on a limited operating
margin based on sales. In addition, the EU body says “the royalty payments
endorsed by the rulings appear to be higher than what independent companies
negotiating on market terms would have agreed”.

What’s more, while Nike European Operations Netherlands BV and Converse
Netherlands BV have more than 1,000 employees, the recipients of the
royalty are Nike group entities that have no employees and carry no
economic activity.

If the Netherlands are found to have allowed Nike to pay less tax than
other companies, this would amount to illegal State Aid and Nike could be
sentenced to pay back billion of euros. “Member States should not allow
companies to set up complex structures that unduly reduce their taxable
profits and give them an unfair advantage over competitors”, said Margrethe
Vestager, Commissioner in charge of competition policy, in the statement.